G07-Corporate Governance

Gautam Adani: The man who built Rs 47,000 crore infra empire
05 Sep 2013, https://economictimes.indiatimes.com/infrastructure/gautam-adani-the-man-who-built-rs-47000-crore-infra-empire/alleged-proximity/slideshow/22309096.cms

M Rajshekhar, ET Bureau In just 15 years, Gautam Adani has built a Rs 47,000 crore infrastructure empire out of Gujarat, a period that coincides with Narendra Modi’s stewardship of the state. ET takes you through the troughs and crests of Gautam Adani...

The political Manager - Between 1995 and 2001, Gujarat politics in general and the state BJP in particular went through a period of great churn. Modi took charge in Gujarat in 2001, knowing he would have to win the state elections. But also, he did not want to depend on Pramod Mahajan.According to Achyut Yagnik, Modi wanted his own source of funds, but this was not easy. Industry was suspicious of this RSS man who had taken charge of Gujarat.“Modi distrusted Adani due to his rapid rise and thought he was too close to Keshubhai.” According to him, it took Adani a year, from October 2001 to September 2002 to find his way into Modi’s inner circle. This was partly due to the 2002 elections. Two other factors contributed. After the Gujarat riots, when some CII leaders criticised Modi, a group of local businessmen—including Adani, Indravadan Modi of Cadila, Karsanbhai Patel of Nirma and Anil Bakeri of Bakeri Engineers—established a rival organisation called the Resurgent Group of Gujarat (RGG) and threatened to leave CII.And then came the Vibrant Gujarat Summit’, and the Rs 15,000 crore commitment from Adani, who wanted to grow big in a state that had Reliance.
The state networker - Adani’s growth has exploded in the last 10 years, funded extensively by banks. In 2006-07, the group had revenues of Rs 16,953 crore and debt of Rs 4,353 crore. By 2012-13, revenues stood at Rs 47,352 crore and debt, according to a recent Credit Suisse report, at Rs 81,122 crore (the company puts the debt figure at Rs 61,762 crore).This extraordinary growth has given rise to persistent charges that the state has favoured his group. The national auditor flagged two instances where the Gujarat government extended undue benefits to the Adani group.

The trader - Adani’s rise started from Gandhidham. In 1981, his elder brother called 19-year-old Adani back from Mumbai to help manage a plastic-film manufacturing business he had just acquired. The business was struggling. It needed 20 tonnes of PVC (polyvinyl chloride) a month, but IPCL, the sole producer in India at the time, couldn’t supply more than two tonnes.Seeing an opportunity, in 1988, Adani began importing plastic granules into Kandla.Adani’s business grew at a blistering pace. By the early-90s, the young entrepreneur started being noticed, including by politicians. A sociologist based in Ahmedabad, who spoke on the condition of anonymity, says that by the early-nineties Adani had come close to state politicians like the late Chimanbhai Patel and Keshubhai Patel.
The Infrapreneur

By 1997-98, Adani decided to move beyond trading and into infrastructure like ports and power plants. Mundra port was his first project, which came up on land given for another use by the Chimanbhai Patel government in 1991-92. This 3,000 acres of coastal land, in Kutch, had been given to agribusiness group Cargill and Adani for salt production. That plan fell through as Cargill backed out after protests by George Fernandes and others.Adani stayed put. Tired of delays at Kandla and Mumbai ports, where the group was incurring a loss of Rs 8-10 crore a year due to delays, he began thinking of converting Mundra into a private captive port.Liberalisation had started. The first ship docked at Mundra in 1998.This is where the parallels with Ambani come in.

The project executor - For the first three years, there was nothing special about Mundra’s growth, and Adani’s decision to set up a port was threatening to blow back. In 2000, in one of the several self-defeating decisions taken by it in the last 15 years. For the last five years, Adani Ports and SEZ has averaged an operating margin of 71%.In May 2010, construction began. And the port began operations in May 2012.Adani also thought big. “He was always ambitious. He wanted to create the largest trading house possible,” says old friend Shah.The Gujarat CII official quoted earlier credits Adani for having “strong conceptual clarity” about the business he wanted to create. “And then, he used political linkages to get the assets and the terms he wanted,” he adds.

Alleged proximity - A decade on, Adani made another Modi moment of reckoning count. This March, when the organisers of Wharton India Economic Forum in the US cancelled their invite to Modi to give, via live video, the keynote address, the Adani Group withdrew as the event’s main sponsor without assigning a reason. Any reference—good or bad—to Gautam Adani’s sprawling business empire is rarely unaccompanied by his alleged proximity to Narendra Modi, the man who could be prime minister in 2014.

Expanding beyond Gujarat - Adani is expanding beyond Gujarat—bidding for ports across India, mining coal in Chhattisgarh and power plants in Maharashtra. Even as is seen to be close to Modi, Adani has been cultivating political relationships, and is reportedly on good terms with Kamal Nath, Sharad Pawar and Praful Patel. Just like Ambani who was identified with the Congress, but could yet seem equidistant across parties. While Ambani’s place in history is secure, Adani’s moment of reckoning awaits him.

The Rise and Rise of Gautam ‘A’dani -  1981: Aged 19, returns from Bombay to help brother in the plastics business1988: Starts a commodity trading fi rm. Turnover: Rs 2.2 cr1989: Expands into export and import on a wider canvas 1992: Cargill and Adani sign JV with Gujarat at Mundra for salt exports. Cargill walks out, Adani stays on. Turnover: Rs 150 cr 1997:Moves beyond trading and into infrastructure 1998: First ship docks at Mundra 1999: Starts coal trading. Turnover: Rs 2,853 2000: Adani Enterprises is the largest trading house in the private sector. Turnover: Rs 3,300 cr 2002: Mundra is India’s largest private port 2006: Adani is India’s largest coal importer 2008: Bunyu coal mine in Indonesia is its first overseas purchase 2009: Starts power generation 2011 Buys Galilee mine and Abbot Point Port in Australia 2012: Becomes India’s largest single-location power producer 2013: Mundra is India’s largest port

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